Click here for more on the impact of the Orchard reorganization and what's behind it.

UPDATE: Orchard Supply Hardware's San Jose headquarters will largely be spared layoffs related to the company's acquisition by Lowe's, a spokeswoman said.

San Jose-based Orchard filed for Chapter 11 bankruptcy protection on Monday, and Lowe's is stepping in to buy most of the company's assets -- including 60 of roughly 90 California stores -- for about $205 million in cash, according to company statements issued this morning.

In a statement, Orchard said the stores would operate as normal during the restructuring and had secured $177 million in debtor-in-possession financing from Wells Fargo to continue meeting financial obligations. Orchard said it would operate as a separate standalone company within the Lowe's umbrella after the sale is completed.

That "business as usual" status includes the headquarters on Via Del Oro in San Jose, where it occupies 75,000 square feet and has hundreds of workers.

As of Feb. 2, 2013, Orchard counted 5,360 employees, with 533 at Orchard's San Jose corporate offices, its Tracy distribution center, or part of field operations.

In court records, Orchard said it expected "continued employment for the vast majority of the Company's employees."

Spokeswoman Leigh Parrish said there was no list available of which stores Lowe's was buying. But she said current construction projects and remodels would continue as planned. Orchard also said in court filings it expected most creditors to be paid.

Commercial real estate brokers told me today they expected Lowe's to retain most if not all of Orchard's San Jose-area stores given the region's strong housing market and high barriers to entry.

The filing comes comes less than two years after Sears spun Orchard off as a public company, a move that was designed to precipitate a ramp-up in growth for Orchard. (Read more about that here.) But Orchard said in a news release that it remained saddled by debt, and anticipated not making scheduled debt payments due at the end of the year.

"...a highly leveraged capital structure instituted in 2006, combined with increasingly competitive conditions and a perilous California economy led the Company to experience sales declines of 21% over the three year period from 2007 to 2010," Orchard said in court documents on Monday.

“Overall, Orchard’s business model offers great potential, but it has been burdened with a high level of debt,” Robert A. Niblock, Lowe's president and CEO said in a news release. “With the debt addressed through the Chapter 11 process and appropriate support from Lowe’s, we believe that Orchard will be positioned for profitable growth as a standalone business within our portfolio.”

Orchard operates mid-size stores that average about 36,000 square feet of interior selling space and 8,000 square feet of exterior garden space. That's dwarfed by the average Lowe's, which is more than 100,000 square feet.

Orchard, founded in 1931, has a 76,000-square-foot corporate headquarters at 6450 Via Del Oro, under a 15-year lease. The company also leases 517,000 square feet of distribution space in Tracy. As of its last annual report, Orchard occupied just shy of 4 million square feet of commercial space.